I'm helping a parent purchase property in BC. I am a Canadian citizen and US permanent resident. I am providing 75% as down, she is getting a mortgage for the remaining 25%. Our broker said that I will have to be on the mortgage too if I want to be on the title. (That's mostly fine--I'm hoping it doesn't affect my ability to get a mortgage too much if I decide to move back to Canada..)
What is the best way to set this up to avoid complications of inheritance? I'm not sure whether I will still live in the US or be in Canada at that point. Are there advantages to setting this up so I own more/less % on the title of the property?
I'm also a little concerned about the proposed speculation tax in BC, but with so few details, it's hard to know.
best options for purchasing property in canada for parent
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waterwingz
- Posts: 5
- Joined: Sun Apr 17, 2005 1:10 pm
Re: best options for purchasing property in canada for paren
[quote="vanwa"]What is the best way to set this up to avoid complications of inheritance? I'm not sure whether I will still live in the US or be in Canada at that point. Are there advantages to setting this up so I own more/less % on the title of the property?[/quote]
Are you an only child? And do you trust your parent? And will you be the sole beneficiary of his/her will?
If so, just gift him/her the money. Assuming it does not exceed your $5.49 million (US$) lifetime limit the gift itself is tax free to both your and your parent in the USA and Canada. You'll need to declare it on your US tax return - form 709 IIRC.
When you parent eventually passes away, you inherit the house essentially tax free (depending on which US state you live in at the time) and any gain in the house value is also tax free as it's your parent's principal residence.
Putting you name on the title means you pay capital gains tax on the any appreciation in the house value when it's eventually sold but it does give you legal title if there is some kind of dispute with the will.
If there are other siblings involved (or other beneficiaries) then you can still have your parent's will setup to leave 100% of the house to you. You just need to be sure it done properly and that nobody "helps" your parent change their will later on.
But IANAL and this advice it worth exactly what you just paid for it. :)
Are you an only child? And do you trust your parent? And will you be the sole beneficiary of his/her will?
If so, just gift him/her the money. Assuming it does not exceed your $5.49 million (US$) lifetime limit the gift itself is tax free to both your and your parent in the USA and Canada. You'll need to declare it on your US tax return - form 709 IIRC.
When you parent eventually passes away, you inherit the house essentially tax free (depending on which US state you live in at the time) and any gain in the house value is also tax free as it's your parent's principal residence.
Putting you name on the title means you pay capital gains tax on the any appreciation in the house value when it's eventually sold but it does give you legal title if there is some kind of dispute with the will.
If there are other siblings involved (or other beneficiaries) then you can still have your parent's will setup to leave 100% of the house to you. You just need to be sure it done properly and that nobody "helps" your parent change their will later on.
But IANAL and this advice it worth exactly what you just paid for it. :)
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waterwingz
- Posts: 5
- Joined: Sun Apr 17, 2005 1:10 pm
If you live in Canada, it works out even better as Canada has no inheritance or gift tax at all.
In the USA, there is an exemptions on inheritances ($6 Million or so) but some states have a local tax on what you inherit.
AFAIK, the biggest risk is that something unforeseen happens and you get written out of the will. Or that you parent thankfully lives a very long time, does not want to sell the house, and you are stuck with no way to recover you money should you need it for something else.
But as I mentioned, this is free financial advice. You might want to run this past a lawyer or tax attorney. Or do a whole lot more research yourself to find out if I'm correct.
In the USA, there is an exemptions on inheritances ($6 Million or so) but some states have a local tax on what you inherit.
AFAIK, the biggest risk is that something unforeseen happens and you get written out of the will. Or that you parent thankfully lives a very long time, does not want to sell the house, and you are stuck with no way to recover you money should you need it for something else.
But as I mentioned, this is free financial advice. You might want to run this past a lawyer or tax attorney. Or do a whole lot more research yourself to find out if I'm correct.
Just remember there is no inheritance tax in either US or Canada. But there is ESTATE tax for US persons.
So, a US person inheriting does not have to worry about estate tax, if the deceased is not a US person.
On homeownership, remember that while you are in US, that portion of the house that you would be considered to own, cannot be your primary residence, so you might get a big tax bill down the road.
So, a US person inheriting does not have to worry about estate tax, if the deceased is not a US person.
On homeownership, remember that while you are in US, that portion of the house that you would be considered to own, cannot be your primary residence, so you might get a big tax bill down the road.
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